Russia's bold financial gambit: Putin's BRICS summit proposal
According to The Economist, Russian President Vladimir Putin plans to propose the construction of a new financial system at the BRICS summit in Kazan. The proposal pertains to the digital payment system known as BRICS Bridge, which, according to the British weekly, may "deliver a blow to American dominance in global finance."
"He hopes (Putin - ed.) that this week's BRICS summit will initiate a significant breakthrough that will lift sanctions," the newspaper states.
Putin's plan to challenge the dollar
"The Economist" reports that BRICS Bridge may borrow concepts from the mBridge project, partially managed by the Bank for International Settlements (BIS).
China has contributed to the system's creation and has initiated developing mBridge software and code. According to sources, British journalists believe China could use existing solutions to create a BRICS Bridge. Such a system could be developed within a year.
The weekly asserts that the BRICS payment system will offer cheaper and faster transactions, which could attract developing economies. However, there are other considerations.
A method to bypass sanctions?
Western officials do not dismiss the possibility that the programme could be developed to circumvent sanctions. This could, in turn, weaken the position of the USA, the largest international payment hub. Washington has gained an advantage over other countries through sanctions.
The most significant initiative is the plan to use digital money backed by fiat currencies (currencies that are not backed by gold or any other assets of commercial value).
In this scenario, central banks will be at the heart of cross-border transactions, rather than banks with access to dollar settlements. This would imply that no country could be excluded from the financial system by another.
"Commercial banks will conduct transactions through their own central banks, eliminating the need to maintain bilateral relations with foreign banks, thus bypassing the network effects of the current correspondent banking system," states "The Economist".
Yuri Ushakov, Putin's advisor, mentioned Russia's plans regarding BRICS in March 2024. At that time, he highlighted that the group of countries is striving to create an independent payment system based on digital currencies and blockchain.
The BRICS summit, where Russia aims to challenge the dollar, will take place in Kazan, Russia, from 22 to 24 October. It marks the first meeting of this expanded bloc, which saw Egypt, Ethiopia, Iran, and the United Arab Emirates join earlier in 2024, alongside the current members (Brazil, Russia, India, China, and South Africa).
